Water Wars

by Lorelei Yang | 11/21/11 11:00pm

Some policy analysts have predicted the outbreak of "water crises" caused by large, water-poor nations like China attacking smaller, water-rich areas like Tibet while seizing resources at a terrible cost to human life. However, formal water wars are unlikely. While water scarcity does result in regional conflict, even two bitter enemies such as India and Pakistan have a peaceful water partnership. What we should be concerned about instead is internationally sanctioned water privatization in the developing world

Due to predictions that water will be the "oil of the 21st century," major corporations have begun moving into the "water market" with the help of allies in government and international monetary organizations. Corporations have won water rights by arguing that businesses are more efficient and capable of financing infrastructure projects.

Unfortunately, case studies of water privatization efforts say otherwise. A 1993 World Bank-approved Buenos Aires privatization project resulted in a 20-percent rise in water costs by 1999, a 30-percent non-payment rate by water recipients and frequent service interruptions. Argentina's story is by no means unique similar tales of woe abound in Africa, Asia and Latin America, where privatization has consistently failed to deliver on its promises.

There are common threads in the developing world's water woes. First, water utilities are often sold to private companies below market values during times of economic duress. Second, privatization efforts result in mismanagement and exploitation of the poor in the form of price gouging. Finally, pressure from the World Bank factors into governments' decisions to privatize in exchange for World Bank loans.

This last observation is most significant. Using global economic governance organizations such as the World Bank, the World Trade Organization and the International Monetary Fund, the West has been pushing an agenda of unfettered privatization, including that of nations' priceless water resources. In recent years, the privatization of a country's public water and sanitation facilities has become a prime condition for the renewal of World Bank and IMF loans, effectively forcing nations to privatize. Multinational corporations are buying up water utilities and concessions at sub-market rates with the World Bank's blessing, only to mismanage their acquisitions.

This is unsustainable. Water privatization has delivered nothing but broken promises and inflated prices. What is needed is a radical de-privatization of the entire water system, best exemplified by Paris' successful buy-back of its municipal water utilities in 2009. Unfortunately, the third world countries that have bourn the brunt of the water privatization push lack the financial resources for buy-backs.

That's why we need a system of publically held, privately maintained water utilities with a transparent price-capping process. Given the international and public nature of water interests, governments must be involved in ensuring cooperation in managing rivers that cross borders.

However, for efficient infrastructure maintenance, governments should enter into fixed-term private service contracts with corporations, granting them a set portion of the water utility's profits in exchange for their services, with the understanding that corporations will be responsible for maintaining the water infrastructure with their own resources. The prospect of profits will incentivize efficient system management, making private maintenance of water systems more efficient than government-controlled maintenance, especially in the third world. Additional funding will only be available during crises.

Finally, to prevent price gouging, prices should be capped through a public referendum process, with rate increases open to scrutiny through public hearings. This allows the public to hold government and corporate forces accountable for their management practices. In the developing world, where corruption runs rampant in government, such a system may also prove less susceptible to corruption. To correct for the disproportionate strain that charging for water creates on the poor, "lifeline" rates should be set up such that lower-income households pay a lower rate on a necessary level of water consumption. Beyond that, a certain percentage of the water utility's annual profits should go into a public fund for low-income families, such that no family's bill exceeds 10 percent of its monthly income.

Such a public-private partnership has the greatest potential to produce the most benefit for the largest number of people so that we can manage water resources for present and future use.